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Bank of America faces the following inflows and outflows during the coming month: 1
Bank of America faces the following inflows and outflows during the coming month: 1. deposit withdrawals of $66 million 2. Customer loan repayments of S2016 million 3. sales of assets $72 million 4. operating expenses of $204 million 5. new loan request accepted of $588 million 6. deposits of S1340 million 7. borrowings from the money market of $86 million 8. nondeposit service fees of $54 million 9. borrowings to be repaid of $46 million 10. divided payment of $560 million 11. extraordinary expense of $100. What is Bank of America's projected net liquidity position for the coming month?
Expert Solution
Solution :
Projected Net Liquidity Position for the coming month of Bank of America can be calculated as follows :
Net liquid asset are a measure of an immediate or near-term liquidity position of a bank, calculated as follows
Net Liquidity Position for the coming month -
= Total Cash Inflows - Total Cash Outflows
Here,
Total Cash Inflows = Customer loan repayments + Sales of assets + New Deposit + Borrowing from money market + Non deposit service fees
= ($2016 + $72 + $1340 + $86 + $54) million
= $3568 million
Total Cash Outflows = Deposit withdrawals + Operating expenses + New loan request accepted + Borrowings repaid + Dividend payment + Extraodinady expenses
= ($66 + $204 + $588 + $46 + $560 + $100)
= $1564 million
Therefore, Net liquidity position for the coming month
= $3568 million - $1564 million
= $2004 million.
Hence, Net liquidity position for the coming month of Bank of America is $2004 million.
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